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“We are not in a fit state to be spending money in this way,” he said. “We have got to address this and if we don’t what will happen is that we will have another government which will probably not address it and we will end up being a basket case.

“This is a big, big problem. Unless we actually can man up and deal with it, we have big problems ahead of us.”

Mr Kwarteng called for “massive spending reductions”, starting with the foreign aid budget, which should be reduced by a third to £5 billion a year. He also proposed a five year “holiday” from corporation tax for new companies.

Therese Coffey, a senior aide to Michael Fallon, the Business Minister, called for the “removal” of employer National Insurance contributions, which she described as a “hidden tax” with few benefits.

Ms Coffey, the Tory MP for Suffolk Coastal, suggested that Labour’s plan to reintroduce the 10p starting rate of income tax sent a clearer signal than the Coalition’s current policy of increasing the tax-free earnings allowance for the lowest paid workers.

The government should abandon its promise to protect funding for the NHS, schools and international aid, she said, and reconsider all budgets in the spending review expected in May.

Ms Coffey said cuts to benefits for pensioners such as the winter fuel allowance and free TV licences should be considered for 2017.

Brooks Newmark, the Tory MP for Braintree, called for universal pensioners’ benefits to be means-tested.

He called for inheritance, capital gains, and corporation taxes to be cut and for new incentives to encourage privately backed road building schemes.

Attacking the City bonus culture and curbing immigration will only drive bright business people out of Britain to work overseas, he warned.

Ben Gummer, who is the parliamentary aide to Alan Duncan, the international development minister, warned that the Tories’ defeat in the Eastleigh by-election showed the public was losing confidence in the ability of politicians to budget properly.

He recommended deep cuts to welfare and pensions, which he said soaked up one third of all income tax paid. “Unless we start tackling that in the medium and long term we are not going to be in a position to start promising those welfare benefits to our children and grandchildren,” he said.